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CBSE 2015 Class 12 Economics Delhi Set-3

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Question : 2 of 3
Marks: +1, -0
An economy is in equilibrium. Find Marginal Propensity to Consume from the following :
National income =2,000=2,000
Autonomous consumption =400=400
Investment expenditure =200=200
Solution:  
C=C‾+cYC = \overline{C} + cY
where,
C‾\overline{C} represents autonomous consumption expenditure
cc represents marginal propensity to consume
So, Y=C+CY+IY = C + CY + I
Substituting the given values,
2000  =400+c(2000)+2002000\; = 400 + c(2000) + 200
2000  =600+2000c2000\; = 600 + 2000 c
or, c  =0.7c\; = 0.7
Thus, marginal propensity to consume is 0.7 .
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